Finance & Business World

Singapore’s government said the economy shrank less than initially estimated last quarter and a second stimulus package may not be needed as the nation emerges from the deepest recession in its 44-year history.

Gross domestic product declined an annualized 14.6 percent last quarter from the previous three months, after shrinking 16.4 percent between October and December, the trade ministry said in a statement today. The initial estimate on April 14 was for a 19.7 percent drop.

Singapore joins other Asian nations in showing signs it may be past the worst of its yearlong export slump. The Bank of Japan may raise its assessment of the economy for the first time since July 2006 tomorrow, even after a report showed a record contraction in the first quarter, economists say.

“The economy probably reached the trough last quarter but the ‘green shoots-of-recovery’ story will have to wait a bit longer,” said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp. in Singapore. “The pace of declines may ease but the second quarter will still be a weak one for Singapore.”

The worst global recession since World War II has battered Singapore’s exports, forcing companies including Chartered Semiconductor Manufacturing Ltd. to fire a record number of workers on the island and prompting the government to cut taxes and hand cash to businesses to help them cope with the slowdown.

Prime Minister Lee Hsien Loong’s government expects the economy to shrink as much as 9 percent in 2009, the most since independence in 1965. The International Monetary Fund predicts a 10 percent contraction, the worst performance in Asia.

Second Stimulus

“We seem to have hit the bottom and things are not likely to get worse from this point on,” Ravi Menon, an official at the trade ministry, told reporters today. The economy is “not likely” to need a second stimulus package this year because things haven’t worsened, he said.

The Singapore dollar rose 0.4 percent to S$1.4557 against the U.S. currency at 11:37 a.m. local time. The island’s currency is the worst performer in Asia after the Malaysian ringgit among 10 currencies outside Japan, declining 0.8 percent this year.

The Monetary Authority of Singapore said last month it would adjust the trading range for the Singapore dollar, a move economists say effectively devalued the currency.

The Singapore dollar’s behavior “is consistent with the policy stance and we’re comfortable with the Singapore-dollar price action,” Ong Chong Tee, a central bank deputy managing director, said at a press briefing today business cards.

Slow Recovery

Singapore’s economy will make a “slow and gradual” climb out of the recession, rather than a “decisive rebound” this year, the central bank said last month. Taiwan may say today its GDP probably shrank at an unprecedented pace last quarter as exports to the U.S. and China fell, according to a Bloomberg News survey.

The global economy is probably “nearing the turning point,” Don Hanna, a New York-based economist at Citigroup Inc., said in a note yesterday, predicting a “subdued” recovery.

“We have probably seen most of the vulnerability already,” Nobel Prize-winning economist Paul Krugman said in Ho Chi Minh City yesterday. “I don’t think we are going to get any more of big shocks from the U.S., Western Europe, Japan or China. My concern has shifted to how do we hold up if we have the world economy that stays depressed for a long time.”

Jobless Rate

Singapore’s $161 billion economy contracted a revised 10.1 percent last quarter from a year earlier. Manufacturing, which accounts for a quarter of the economy, fell 26.1 percent, less than the 29 percent decline estimated on April 14. Services shrank a revised 5.2 percent while construction gained a revised 24.4 percent.

Employers fired a record 12,600 workers last quarter in Singapore, pushing the jobless rate to the highest in more than three years. Electronics exports have dropped every month for more than two years, and the financial services industry is shrinking after the global credit crisis.

Singapore’s financial industry will probably shrink this year compared with 2008 even amid signs of some improvement in lending in the first quarter, the central bank’s Ong said.

The economy may contract 6 percent to 9 percent this year, the trade ministry reiterated today. Consumer prices are forecast to remain unchanged or fall 1 percent in 2009, and non- oil domestic exports may plunge as much as 13 percent.

“While trade is still expected to be weak for the rest of 2009, further declines of the magnitude seen earlier this year seem unlikely,” the ministry said. “Any new risk, such as an acute worsening of the Influenza A (H1N1) situation or undisclosed weaknesses in U.S. or European banks coming to light, could set back the process of economic recovery by several quarters.”

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Thailand’s central bank unexpectedly kept its benchmark interest rate on hold as it assesses the effect of its most aggressive string of cuts ever on an economy facing its first recession in a decade.

The Bank of Thailand held the one-day bond repurchase rate at 1.25 percent today, the lowest level since July 2004. Only two of 21 economists surveyed by Bloomberg News expected the decision. Eighteen economists predicted a 25 basis-point cut and one tipped a 50 basis-point reduction.

“The central bank may want to wait and see the impact of its previous cuts,” said Charl Kengchon, an economist at Kasikorn Research Ltd. in Bangkok who predicted the decision. “The policy rate is less effective in this environment.”

Thailand’s economy probably contracted for a second consecutive quarter in the first three months of this year, putting it into recession after export-demand collapsed and political protests sapped consumer confidence. Government spending may be more effective in spurring growth than lower interest rates, the central bank said April 17.

Thailand’s seven-party coalition government is strong enough to pass a borrowing plan and next year’s budget to help buoy the economy, Prime Minister Abhisit Vejjajiva said in an interview today.

The government on May 6 unveiled a four-year 1.4 trillion- baht ($40.6 billion) investment plan, involving transportation, water distribution, energy, health and education projects. That’s in addition to a 116.7 billion-baht package of training programs, cash handouts and public works aimed at stemming the economic slide this year.

‘Less Effective’

The Bank of Thailand’s interest rate of 1.25 percent follows reductions totaling 2.50 percentage points over four meetings in as many months to April. Consumer prices have been falling since January.

Monetary policy is now less effective than fiscal spending in spurring the economy, Bank of Thailand Deputy Governor Atchana Waiquamdee said April 17.

Loan growth slowed and bad debts rose in the first quarter as the economy deteriorated, the central bank said yesterday no fax payday loans. The nation’s banks are reluctant to lend amid the global recession so fiscal policy is needed, Finance Minister Korn Chatikavanij said April 6.

“Loan growth can pick up if we have demand and acceptable risks. There is no demand now,” Bank of Thailand senior director Nawaporn Maharagkaga said yesterday. “The ability to pay debts has deteriorated because of economic conditions.”

Southeast Asia’s largest economy after Indonesia probably shrank as much as 6 percent in the first three months of this year, Korn said May 7. The government report is due May 25. Gross domestic product will probably continue to shrink before rebounding in the year’s final quarter for its first annual contraction since 1998, the government predicts.

Two Dead

Consumer confidence is at the lowest level in seven years. An emergency decree was imposed in the capital Bangkok last month to quell anti-government riots that left two people dead. Premier Abhisit has pledged to call elections once stability is restored in the nation of 66 million people. The protesters say the prime minister’s rule is illegitimate because he came to office after a court dissolved the former ruling party.

Power in Thailand has shifted between parties allied to former Prime Minister Thaksin Shinawatra and his opponents since the 2006 coup that ousted him, hurting successive governments’ ability to implement spending plans.

Thailand’s economy is improving as production has picked up in electronic and automotive industries and exports and consumer demand are recovering, Korn said May 7.

“We’ve seen increasing demand over the past four to six weeks,” Richard Han, chief executive officer at Hana Microelectronics Pcl, said in an interview with Bloomberg Television today. “The first quarter was the worst.”

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The Bank of England hired the most staff in more than two decades last year and raised the budget for its bonus pool as the financial crisis stretched resources and stressed out officials.

The number of full and part-time employees rose by about 6 percent in the year to February to 1,857, the first “significant” addition since 1987, the U.K. central bank said in its annual report published in London today. It also lifted the budget for the bonus pot to 8.1 percent of salaries from 7 percent in the previous year.

“The increase in staff numbers was due to the extra workload brought on by the bank’s new responsibilities,” the bank’s non-executive directors said in the report. “In recognition of the exceptional workload over the past year, the bank increased its bonus and special payments budget.”

The Bank of England grappled with the near-collapse of HBOS Plc and Royal Bank of Scotland Group Plc, brought interest rates to a three-century low and began unconventional policy measures to fight Britain’s worst recession for a generation. The staff increase contrasts with the rest of London’s financial services industry, where companies may cut thousands of jobs this year.

The directors have “been concerned about pressures on staff, particularly on key individuals in the markets and banking areas” and have raised questions on whether “actions were being taken to recruit and redeploy staff and to manage the risks associated with the exceptional levels of stress in many parts of the organization,” the report said pay day loan lenders. The committee said it’s satisfied that the issues are being managed effectively.

Job Cuts

Financial services companies may cut about 29,000 jobs this year before employment growth resumes in 2010, the Centre for Economics and Business Research forecast on April 20.

The Bank of England’s balance sheet more than doubled to 147.9 billion pounds ($226 billion) as of the end of February from 72 billion a year earlier as loans and advances to banks increased. The central bank expanded its three month money- market operations and introduced dollar auctions to improve the flow of credit in the economy.

King’s salary rose 2.5 percent to 297,920 pounds, while pay for former deputy governors Rachel Lomax and John Gieve increased by the same amount, to 246,338 pounds. Charles Bean took over from Lomax on the same salary, the report said. None received bonuses.

The bank’s four external members of the monetary policy committee, who serve three-year terms on Treasury appointment and work on a part-time schedule, were paid 96,478 pounds and an extra 30 percent to make up for exclusion from the bank’s pension fund.

King may seek to consult more with bankers as part of an enhanced communication strategy, according to the report.

“The governor’s program of regular contacts with financial sector participants will be expanded over the coming year,” the report said.

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International demand for long-term U.S. financial assets rose in March as China added to its portfolio of Treasury securities, according to government data.

Total net purchases of long-term equities, notes and bonds rose a net $55.8 billion, compared with buying of $22 billion in February, the Treasury said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $23.2 billion, compared with net selling of $91.1 billion the previous month.

Investors worldwide have sought a haven from global market turmoil by buying U.S. Treasury securities, which last year posted the best returns since 1995. The government securities gained 14 percent in 2008, according to Merrill Lynch’s U.S. Treasury Master Index. So far this year, the index has declined.

“As the economy gradually exhibits signs of improvement, foreign appetite for U.S.-denominated securities improves,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “Even in this difficult environment, the U.S. remains the safe haven.”

The U.S. Treasury and the Federal Reserve pledged $12.8 trillion to drag the economy out of its longest recession since the 1930s and restore confidence in the global financial system. The Fed and other central banks of the industrial world, in turn, have lowered interest rates to near zero in the aftermath of the credit crisis.

Beat Forecasts

The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy mortgages.

Before today’s report, economists predicted investors would buy a net $32.5 billion of long-term securities in March, according to the median of eight estimates in a Bloomberg News survey.

Net foreign purchases Treasury notes and bonds were $55.3 billion in March compared with purchases of $21.6 billion a month earlier no fax payday loans.

China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose 3.2 percent to $767.9 billion in March. Japan, the second-largest holder, reported holdings rose 3.7 percent to $686.7 billion.

The Treasury’s last report showed China’s purchases of U.S. securities rose weeks before Chinese officials questioned whether such investments were safe.

China ‘Worried’

People’s Bank of China Governor Zhou Xiaochuan in March urged creation of a “super-sovereign reserve currency” after Chinese Premier Wen Jiabao said he’s “worried” a weaker U.S. dollar might hurt China’s investment. The U.S. needs China to sustain its purchases to fund billions’ worth of programs aimed at reviving the economy about 70 percent of which reflects consumer spending.

Still, China’s purchases slowed in February and most were in short-term Treasury bills.

Timothy Geithner will make his first trip to China as Treasury secretary next month, the Treasury said May 12. In a semiannual report on foreign-exchange policies released April 15, Geithner refrained from labeling China as a currency manipulator.

A bipartisan group of lawmakers, led by Democratic Senator Debbie Stabenow of Michigan and Republican Jim Bunning of Kentucky, on May 11 announced plans to revive legislation to press China to raise the value of its currency, the yuan, by threatening to raise tariffs.

Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac continued to slide, with net sales of $15.6 billion after net buying of $1.1 billion.

Net foreign purchases of U.S. equities were $13.2 billion in March, after net purchases of $5.1 billion the previous month. Investors bought a net $3.5 billion in U.S. corporate debt in March, the report showed.

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Singapore’s retail sales fell for a sixth month in March, extending the longest period of declines since 2002, as the nation’s worst recession and the loss of thousands of jobs depressed spending.

The retail sales index dropped 7.3 percent from a year earlier, after sliding a revised 5.5 percent in February, the Statistics Department said today. The median estimate of 11 economists surveyed by Bloomberg News was for a 7 percent decline. Adjusted for seasonal factors, sales fell 5.1 percent from February.

Singapore’s economy is expected to shrink as much as 9 percent this year and the central bank expects a “slow and gradual” recovery as exports and production continue to slump. Employers fired a record number of workers last quarter, and companies such as Singapore Airlines Ltd. and Singapore Press Holdings Ltd. have cut or frozen wages.

“Employment is going to keep on deteriorating and discretionary spending will continue to come down,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte low interest personal loan. “We are not expecting a strong improvement in retail sales until the early part of 2010 when the labor market stabilizes.”

Singapore’s unemployment rate rose to 3.2 percent last quarter from 2.5 percent in the previous period, according to the Ministry of Manpower. Employers cut 12,600 jobs in the first three months of the year.

Vehicle sales fell 8.2 percent in March from the same month in 2008 and slid 20.6 percent from February.

Purchases of apparel and footwear dropped 15.1 percent while sales of furniture and household equipment declined 23.1 percent from a year earlier. Sales at gas stations slipped 19.4 percent amid lower oil prices.

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Prices paid to U.S. producers probably rose in April as oil costs rebounded, economists said before a report today.

The projected 0.2 percent increase in wholesale prices would follow a 1.2 percent drop in March, according to the median estimate of 68 economists surveyed by Bloomberg News. Another report may show the number of people claiming jobless benefits climbed last week from a three-month low.

Signs that the worst of the recession is over may boost commodity costs further, alleviating concern over deflation, or an extended drop in prices that hurts the economy. Along with the trillions of dollars pumped into the banking system by the Federal Reserve, increases in raw materials may stoke inflation once an economic recovery takes hold.

“It’s impossible to see how deflation can persist given the amount of liquidity in the system,” said Maxwell Clarke, chief U.S. economist at 4Cast.com in New York. “With oil moving back up, the thought in people’s minds becomes that inflation could ultimately become a problem that outweighs deflation.”

The Labor Department’s producer-price report is due at 8:30 a.m. in Washington. Economists’ forecasts ranged from a decline of 0.6 percent to a 1 percent gain.

Labor may also report at the same time that initial jobless claims rose to 610,000 in the week ended May 9 from 601,000 a week earlier, according to economists surveyed. The increase in applications probably reflects the closing of all Chrysler LLC assembly plants starting May 4 for at least 30 days while the automaker reorganizes under bankruptcy.

Recession Easing

Smaller declines in manufacturing and an easing in the housing slump indicate the worst recession in at least 50 years may be starting to abate.

The economy will probably shrink at a 1.9 percent annual pace this quarter after contracting at an average 6 free car insurance quotes.2 percent rate in the prior six months, according to economists surveyed this month.

DuPont Co., the third-biggest U.S. chemical maker, and Dr Pepper Snapple Group Inc., the beverage maker spun off by Cadbury Plc last year, are among companies able to charge more. Wilmington, Delaware-based DuPont raised prices 5 percent on average in the first quarter and said demand will improve because most customers have used up inventories and are increasing purchases.

“We expect sales in the second quarter to be flat to slightly up from the first quarter,” Chief Executive Officer Ellen Kullman said on a call with investors on April 21.

Price Increases

Plano, Texas-based Dr Pepper Snapple yesterday reported first-quarter profit that beat analysts’ estimates and raised its 2009 forecast after increasing prices and cutting expenses.

“Markets and consumer sentiment appear to be on the mend,” Chief Executive Officer Larry Young said during a conference call with analysts.

Still, a report yesterday showed consumers aren’t yet totally out of the woods. Retail sales fell 0.4 percent in April after a 1.3 percent decline in March, according to data from the Commerce Department.

Producer prices are one of three monthly inflation gauges reported by Labor. Prices of goods imported into the U.S. rose 1.6 percent in April as petroleum costs surged, the government said yesterday.

Labor figures tomorrow may show consumer prices were unchanged last month after declining 0.1 percent in March, economists forecast. Excluding energy and food, prices probably rose 0.1 percent.

For their part, Fed policy makers are still more focused on the threat that prices will fall.

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Retail sales in the U.S. probably steadied in April as consumers gained confidence the economic slump may be easing, economists said before reports today.

Purchases were unchanged after dropping 1.2 percent in March, according to the median estimate in a Bloomberg News survey. Excluding automobiles, sales probably rose 0.2 percent, after a 1 percent decrease in March, the survey showed.

Lower borrowing costs, a rebound in stocks and smaller job losses last month led to the biggest jump in sentiment in three years, making it more likely spending will see sustained gains in the second half of 2009. Even so, an unemployment rate that is projected to remain elevated for years may make for a subdued economic recovery.

“We probably have seen the very worst in terms of massive declines in retail sales and we’re probably in this period of showing very little growth,” said Michael Gregory, a senior economist at BMO Capital Markets.

The Commerce Department’s report is due at 8:30 a.m. in Washington. Sales estimates ranged from a drop of 0.8 percent to an increase of 1.1 percent.

Other reports today may show the cost of goods from abroad climbed in April for a second month as fuel prices rebounded, and companies continued to trim inventories in March, according to economists surveyed.

Auto Slump

Car dealers were among the retailers that struggled last month. Autos sales dropped to a 9.3 million annual pace from a 9.9 million rate in March.

Chrysler LLC, whose U instant faxless payday loans.S. sales tumbled 48 percent in April from the same month last year as bankruptcy neared, said last week it will offer rebates of as much as $6,000 to boost demand. The incentives began May 6 and end June 1.

Even so, fewer job losses and gains in stocks are making Americans less pessimistic, helping sales at other retailers to stabilize. Consumer confidence jumped by the most since 2005 in April, according to a report last month by the Conference Board, a New York-based private research group.

Payrolls fell by 539,000 workers last month, the smallest drop since October, the Labor Department reported last week. Still, the jobless rate climbed to 8.9 percent, the highest level since 1983, and economists surveyed this month project unemployment will average 9.6 percent in 2010.

Kohl’s, Wal-Mart

Kohl’s Corp. and BJ’s Wholesale Club Inc. were among retailers last week that said first-quarter preliminary earnings exceeded their forecasts and April sales signaled shoppers are returning to stores. Wal-Mart Stores Inc., the world’s largest retailer, said sales at U.S. stores open at least a year rose 5 percent, also beating estimates.

April same-store sales rose 0.7 percent, the first gain since September, according to a report last week from the International Council of Shopping Centers, the New York-based trade group that measures sales at about 40 retail chains.

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Two months ago, Ivan Coleman was struggling, his mortgage payment having ballooned to $1,200 - more than half his income. Starting June 1, his monthly payment will fall to $725.

"My mortgage company was helpful, eager to have me stay in my home," said Coleman, who first fell behind on his payments after losing his job.

Coleman, who has owned his Maple Heights, Ohio, home for ten years, is among the first wave of homeowners to have their mortgages modified under President Obama’s foreclosure-prevention program. As of last week, for example, Chase Mortgage, the servicing side of JP Morgan Chase (JPM, Fortune 500), had issued more than 15,000 modifications under the plan.

Bank of America (BAC, Fortune 500), which began reaching out to at-risk borrowers in early April, has sent out 100,000 letters to borrowers who could potentially benefit. It has issued some modifications, although it’s not releasing data on just how many.

When the plan went into effect on March 4, Obama predicted it could help as many as 4 million people stay in their homes. It did this primarily by encouraging lenders to assist delinquent or at-risk mortgage borrowers by lowering interest rates to the point that total monthly housing payments would not exceed 31% of their gross monthly income.

How to apply

Becoming one of those 4 million takes five simple steps.

Step 1: Visit the Web site

Everything you need to get started is located here MakingHomeAffordable.gov

Step 2: Take the quiz

Click on "Find out if you are eligible" and then select the "Home Affordable Modification" option. (The "Refinancing" option is just for those who are current on their loans.) Take the five-question quiz. Based on your answers the site will tell you if you likely qualify for a modification under the Obama plan.

If you do - meaning you bought your house before Jan. 1, 2009, and owe less than $729,750; it is your primary residence; you are delinquent on your payments; and your payment is more than 31% of your monthly gross income - the site will present an eight-item checklist of paperwork you’ll need to submit to your lenders.

Step 3: Compile the paperwork

The site recommends that you have: household-income documentation, such as pay stubs; tax returns; savings account records; mortgage statements; second mortgage info, such as home-equity loans statements; credit card bills; and information on other debt, including student and car loans.

You will also be asked to write a letter describing why you need assistance. Your reasons could include medical expenses, job or income loss, or even divorce.

A well-done hardship letter can make a difference in whether a loan wins modification, according to foreclosure-prevention counselors. These letters can point out factors that led to the delinquency but that may not be evident from your other paperwork.

"Don’t say, ‘I never could have afforded it in the first place,’" advised Tom Kelly, a spokesman for Chase Mortgage. "That isn’t the ideal answer."

Instead, explain that illness prevented you from working for a time, that you’ve recovered and are back at work and paying bills again. Or a temporary job loss cause the problem, etc. Without that context, lenders may think you were just careless - or worse cash advance loans.

Step 4: Call your lender or servicer

Once your information packet is complete, call your lender or servicer - the company you write your monthly mortgage check to. To see if your lender is participating in this plan - or to get the phone number - click on "Contact Your Mortgage Servicer" on the Making Home Affordable site. After you’ve talked to one of their modification specialists, you’ll be instructed to fill out an application and submit your documents.

There should be no need for face-to-face meetings with servicers, according to Jumana Bauwens, a spokeswoman for Bank of America. She said borrowers will be able to do everything over the phone and through the mail.

Step 5: Wait

During this phase, the lender will decide the approach it wants to take to reducing your debt: lowering your interest rate, extending the life of your loan, or reducing your debt balance.

The lender’s first step will be to get your payment down to 38% of your monthly gross income. Once the debt is reduced that far, the government will pay the lender to lower it to 31% of income.

At that point, the loan will be rewritten, you will get the new paperwork to sign and the new payment will go into effect on your next bill.

This process has been taking several weeks to a month, so be patient. Although the banks expect it will get quicker as their personnel become more familiar with the modification plan.

"The 31% is now an industry standard and that’s much more easily calculated," said Chase’s Kelly.

One thing to remember: These are trial modifications that only become permanent once you make on-time payments for three consecutive months.

Another option

Some borrowers may prefer going through a foreclosure-prevention counselor rather than dealing directly with lenders. The counselors can answer questions about what specific documents are needed, make sure that applications are complete and take the time to explain the proposed deals.

In addition, the counselors offer advice on getting spending under control. "Budget counseling is critical, but the banks have told us they’re not set up to do that," said Mark Seifert, director of Cleveland-based East Side Organizing Project (ESOP), a community advocacy group that does extensive foreclosure counseling.

Ofelia Navarro, executive director of the Spanish Coalition for Housing in Chicago, said her organization filed 300 packages for modification under the new plan on April 9. She is still waiting to hear back on those applications, but she believes the new program will eventually make the process go faster and smoother.

"I understand that the servicers did not get the final regulations until [a couple of weeks ago]," she said. "Now, they’re ready to move forward."

In fact, Ivan Coleman used ESOP for his modification, and it took more than two months to complete. "My counselor, Ana Gonzales, handled everything," he said. "She told me to be patient, that it would take 30 days, but it took more than that."

But he’s very pleased with the outcome and that he now has a good chance of keeping his home. 

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German industrial production unexpectedly held steady in March, ending a six-month slump and adding to signs that a recession in Europe’s largest economy has reached a trough.

Output was unchanged from February, when it slumped 3.4 percent, the Economy Ministry in Berlin said today. Economists predicted a decline of 1.3 percent, the median of 27 forecasts in a Bloomberg survey showed. The annual rate of decline slowed to 20.4 percent.

“It is very pleasant to see that the decline of production has temporarily come to an end,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “Output only stagnated because of the government’s car-wreckage premium and a construction surge following a tough winter. Still, orders and sentiment indicators are giving promising signals that the worst is behind us.”

Germany’s economy, which will probably contract the most since World War II this year, may benefit from a pick up in the global economy later this year. Factory orders rose in March for the first time since August, data showed yesterday, and business confidence rebounded from a 26-year low last month.

Exports unexpectedly increased for the first time in six months in March, the Federal Statistics Office said today. The government expects the economy to return to growth next year, forecasting a 0.5 percent expansion after a contraction of 6 percent in 2009.

Record Low

Chancellor Angela Merkel has pledged 82 billion euros ($109 billion) to stimulate growth and the European Central Bank cut interest rates to a record low yesterday. ECB President Jean- Claude Trichet said the bank unanimously agreed on a 60 billion- euro plan to buy bonds, stepping up its response to the slump.

Investment-good production rose 2.5 percent in March as a result of a 15 cash advance now.4 percent surge in car and car-parts output, the Economy Ministry said in today’s report. That was offset by a decline in basic and consumer goods. Construction output rose 7.6 percent from February.

Demand for manufacturing goods increased for the first time in seven months in March, boosted mainly by foreign bulk orders, the ministry said yesterday. German business confidence rebounded from a 26-year low in April.

Germany’s BASF SE, the biggest chemical company in the world, on April 30 reported profit that beat analyst estimates after shuttering factories to weather a global slide in demand. Earnings at Siemens AG, Europe’s largest engineering company, jumped after the company accelerated a cost-cutting program and tapped demand for transformers, turbines and medical scanners.

‘Rays of Hope’

“Certain rays of hope have emerged in the past two to three months with regard to a slight improvement of the overall environment,” Bundesbank President Axel Weber said on May 4. “However, a handful of rays of hope is not a reliable sign that the global economy is out of the woods. From today’s perspective, I don’t expect positive growth rates before the second half of next year.”

Munich-based Linde AG, the world’s second-biggest producer of industrial gases, said this week that it no longer is counting on higher 2009 profit and sales and will cut about 3,000 jobs this year. HeidelbergCement AG, the German cement maker owned by billionaire Ludwig Merckle, posted a first- quarter net loss of 63 million euros after global demand for construction slumped.

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Asia’s export-driven growth model is “broken” and nations in the region need to do more to boost domestic demand, said Nouriel Roubini, the New York University economics professor who predicted the financial crisis.

“The old model of export-led growth is broken,” Roubini said in an interview with Bloomberg News yesterday. “Unless policy makers find ways of stimulating consumption and private domestic demand, then the growth recovery is going to be, even over the medium term, weaker than otherwise.”

Asia’s developing economies are almost twice as reliant on exports as the rest of the world, with 60 percent of their overseas sales ultimately destined for the U.S., Europe and Japan. The International Monetary Fund yesterday said it expects recessions this year in South Korea, Singapore, Taiwan, Malaysia and Thailand.

“Asia has to find a new model of growth,” Roubini said in Singapore, where he is attending a conference organized by Bank of America-Merrill Lynch. “This is happening too slowly and this will make Asia’s recovery lag.”

Asian nations must implement more policies to boost domestic consumption as advanced nations are unlikely to absorb the region’s excess production, Asian Development Bank President Haruhiko Kuroda said May 4. To boost local demand, Asian governments need to spend more on health and education and boost social safety nets to encourage consumer spending and reduce precautionary savings, he said.

‘Weak Outlook’

Exports by developing Asian economies may shrink 10.3 percent this year, after growing 14.7 percent in 2008, the Manila-based ADB predicts. Global trade may contract for the first time since World War II this year, according to the World Trade Organization, as U.S. and European demand slumps.

“A good chunk of Asia is going to be in recession this year, with the exception of China and India,” Roubini said. “Recovery is going to occur next year, but even then I see a weak outlook for the U.S., Europe and Japan, and unless there is a recovery in these economies, the recovery in Asia is going to be less than otherwise.”

Asian policy makers have been responding to the global recession by slashing interest rates and implementing fiscal stimulus packages free credit score online. Governments in the region have pledged to pump more than $950 billion into their economies through increased expenditure, tax cuts and cash handouts to kick-start local consumer and business spending.

‘Sharp Deterioration’

“The economies of Asia, like the rest of the world, have slowed significantly,” Monetary Authority of Singapore Managing Director Heng Swee Keat said in a speech today. “While actions taken by governments and financial authorities have helped to stem the sharp deterioration, the road to full economic recovery is likely to be bumpy.”

Further fiscal stimulus may be required in Asia given the likely weakness of the recovery in the U.S., Europe and Japan, Roubini said.

“Greater fiscal stimulus might be necessary,” he said. “One way to stimulate domestic demand in the short run is domestic public demand.”

Economies in Asia face a “long recovery ahead” from the global slowdown and “forceful” fiscal measures are still needed to lift the region out of the recession quickly, the IMF said in a report yesterday.

External Demand

“Asia’s strong reliance on external demand weigh against the prospects of a speedy turnaround,” the IMF said. “Despite governments’ efforts to invigorate domestic demand, the prospects of a recovery at this stage hinge critically on a rebound in global activity.”

The IMF last month lowered its world economic growth forecasts and said the global recession will be deeper and the recovery slower than previously thought as financial markets take longer to stabilize. The world economy will contract 1.3 percent, it predicts.

The U.S. remains weak and the consensus among analysts that the world’s largest economy may expand in the third and fourth quarter is “too optimistic,” Roubini said.

“Certainly the rate of economic contraction is slowing down from the freefall of the last two quarters,” he said. “We are going to have negative growth to the end of the year and next year the recovery is going to be weak.”

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